Prime Minister Mark Carney announced last week that Canada will remove retaliatory tariffs imposed on many incoming American goods effective Sept. 1, as part of an effort to restart stalled trade talks with the U.S. The about-face covers goods that are compliant with the Canada-United States-Mexico Agreement (CUSMA) and should lead to the removal of levies on a range of consumer goods, from orange juice to home appliances. But just how much relief should consumers expect and when will they see it? The Financial Post explains.

What are the counter tariffs and why is Carney removing them now?

Canada first imposed counter

tariffs

on $30 billion of goods imported from the U.S. in early March, following the announcement that U.S. President Donald Trump’s administration was imposing a 25 per cent tariff on Canadian exports (as well as a 10 per cent levy on energy product exports). Another round of retaliatory tariffs on $29.8-billion of goods followed on March 13. After talks between Canada and the U.S. failed to result in negotiated relief from U.S. tariffs by an Aug. 1 deadline, Carney hinted that he would be open to rolling back some of the counter tariffs if it would help Canadian companies withstand the months-long trade dispute. After speaking to

Trump by phone last week

, Carney said he had assurances that removing counter tariffs on CUSMA-complaint U.S. goods would lead to intensified talks about Canadian sectors still facing steep levies. Carney also highlighted the existing trade pact’s value. “As we work to address outstanding trade issues with the U.S., it is important we do everything we can to preserve this unique advantage for Canadian workers and their families,” he said.

What products were hit with Canada retaliatory tariffs?

While the first batch of U.S. imports hit by counter tariffs in March prominently included orange juice and peanut butter, the list was much wider than that, and included meat and poultry, nuts, oils, fruit, vegetables, herbs, seafood, sugar, chocolate, margarine, pasta and soap, tires, motorcycles, toilet paper, cosmetics, fridges and stoves, hand tools, carpets, some clothing items such as suits and pyjamas, footwear, furniture, bedding, trunks and suitcases, tobacco products, spirits, beer and wine. Even hair accessories such as combs and curlers, as well as works of art, were on the list. The March 13 reciprocal tariffs added steel and aluminum products, tools, computers and servers, display monitors, sports equipment, and cast-iron products.

 

Are the costs of the counter-tariff costs being passed along to consumers in Canada?

There are a few metrics that suggest at least some of the pain was being shared by buyers of Canadian goods. Statistics Canada reported in July that prices for clothing and footwear rose two per cent in June from the corresponding period last year. That compared to 0.5 per cent year-over-year increase in May. “Uncertainty surrounding international trade put upward pressure on prices for clothing and footwear in June, as the industry faced higher costs in the wake of tariffs,” Statistics Canada said. Meanwhile, grocery prices were up 3.4 per cent in July after rising by 2.8 per cent in June, according to the data agency, with food inflation outpacing headline

inflation

for the past six months. But some consumers appear to be sidestepping the additional tariff costs by seeking out alternatives. When

Loblaw Cos. Ltd.

reported second-quarter earnings on July 24, chief executive Per Bank said suppliers had been submitting cost increases, with about a third of those related to tariffs. However, he added that sales of products affected by the tariffs — identified in stores — had dropped by more than 15 per cent and the pace was accelerating.

Were suppliers and retailers that were passing on the costs fully covering the impact of tariffs?

In a speech in June,

Bank of Canada

governor Tiff Macklem said there is not usually an immediate or direct correlation between the increase in tariffs and the prices paid for goods by Canadians. Based on an earlier tariff skirmish between the U.S. and Canada in 2018, he suggested there would likely be a “pass-through” of about 75 per cent of the costs of tariffs over roughly a year and a half — if current tariffs and counter-tariffs remained in place. In the speech delivered in St. John’s on June 18, Macklem noted that the cost of additional tariffs isn’t the only things companies must weigh when determining consumer prices. There are also indirect effects stemming from trade disruption, with Canadian companies facing higher costs related to finding alternative suppliers and developing new markets, he said.

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When will consumers see prices come down?

While the removal of counter tariffs is expected to take some pressure off the cost of items from groceries and apparel to sporting equipment, it could take until October to start seeing the effects of the policy change on measures such as the consumer price index, according to Erik Johnson, a senior economist at Bank of Montreal. “It could also take time for stores to go through already tariff-affected inventory before prices start to change,” he said. “Some stores even pivoted suppliers away from U.S.-based sources to avoid tariffs so it might also take time to realign supply chains (for things such as citrus fruits and juices) and prices to return to previous levels.”

Clifford Sosnow, chair of the international trade group at law firm Fasken Martineau DuMoulin added that consumers will continue to feel the impact for some time because grocery and consumer operations tend to purchase on forward contracts where prices are locked in. “Even if the tariffs are removed for many goods on September 1, the cost impact may continue to be felt for many months,” he said. And the relief won’t be broad-based, Sosnow said, because tariffs remain on targeted sectors such as steel, which provide basic building blocks for our purchase economy. As a result, purchasers of furnaces, refrigerators and stoves, for example, “will continue to feel the sting,” he said.

• Email: bshecter@nationalpost.com